Embracing AI for Positive Change in the Marketplace

Considerably. But let me give it a little bit more background. A good friend of mine, Alex Schussler, was the founder of SmartEquip. And he coined a phrase that I like to use a lot, where all we've done with business systems has gone from paper to glass. We took a form and five, six parts that people used to write out, and we put that template on the screen, and people, instead of writing them, type it into a keyboard. And we took away the instantaneous... data that was available on Cardex's, and it took us about 30 years to the point we got to interactive online computers so that we got that back. But we really haven't done much in business systems, period. And I don't care whether it's Oracle or SAP or Infor or Microsoft or DIS or CDK or whoever the EMPAS is or whoever it is. They have not served the industry well. And the dealers are...

complicit as well because they haven't they've lost the best practices thinking that we really got going in the 80s they've left it behind so everybody's kind of fat dumb and happy sitting back waiting for i don't know what

in the last hundred days we use artificial intelligence for closed captioning on our film clips we can do that in 130 different languages We use artificial intelligence in creating voice audio tracks from Word documents. We can do that in 130 languages. I'm exploring a company that will allow my daughter and I to be created as avatars by going to a studio and being filmed for about an hour talking, and then they can emulate our voice. So instead of having a camera studio and making videos the old-fashioned way, I can create word text,15 slides long,500 words a slide, characters a slide. So it's about a seven or eight minute film clip without being present. So I can inject film clip. Now, you would expect us in the education world to be leading the parade a little bit in the use of artificial intelligence. Our classes are all... Credit approved in schools. We're way ahead of what the schools do in how they monitor and manage their classes.

So, you know, Caroline and I were talking about it today. I don't think that we're really doing anything exceptional, but we're committed to staying ahead of what the market is looking for. I don't see that with business systems people anymore.

Yes.

Yeah. The other thing that seems to be going on, Joan, is much more single-purpose software. Market coverage, data analytics, financial reporting, call reporting, CRM, all of these little things. You know, DBS got out, dealer business systems from Caterpillar, DBSI. They stopped supporting it. when they had so many disparate packages bolted on. We now also have business systems that don't talk to each other. You know, Salesforce, as an example, has a customer profile on it. Most of the major business systems have a customer profile on it. They need to be maintained separately because those two systems don't talk to each other. And, you know, to the point of the dealership, I remember back, and this is, forgive me for doing this, but, I remember back when I'm starting 50-something years ago, we had really talented, pushy people running in those days data processing to improve things. It wasn't just financial. It wasn't just parts.

It started delving right into the guts of the business. What you're talking about, Ian Sharp, who was the founder of IP Sharpen Associates, who created APL in the community and sold his business to Reuters, and that caused Bloomberg to be created. He had a package back in the 70s, early 70s, to help women or men in their kitchen relative to their inventory of food and had it all on the computer and shopping lists created, menus that they liked. He would just remove all the rest of the stuff. That's 50 years ago. Today, you've got a fridge that has a screen on it that'll tell you what's in there. If you want to get a menu, you push a button and ask for it like Google. It's right on the fridge. There's so many things that systems now are using to enhance the lives of people. So we've got diagnostic sensors in the equipment. We've got telematics. We've got geofencing. We've got electronic catalogs.

We have service repair and maintenance instructions. We have all of this stuff. How are we using it? The Catapult started with the storefront in the late 1980s, and they still haven't got any dealer over 10% of the parts business coming through the internet. What's going on?

Let's just talk about an application for a second, just to get out there. We have job codes for repairs and maintenance from just about every brand. Unfortunately, they're all different. Automotive, they use a common coding structure. But that also means that when I open a work order, I can segment the job to a particular component, operation, et cetera. I can also then start collecting data history on how long it takes to do those things and what parts are consumed. So Wave of Wand, when I was at Finning in the 70s, I'm responsible for Exchange, the remanufactured product line. And I was a time and material customer for our service department. And I desperately pushed for about a year to get fixed pricing. Well, they finally gave me fixed pricing. So we started a flat rate system in 1979. from zero. Caterpillar acquired that file of 300,000 job codes and paid finning to purchase it.

So over a number of years, let's call it 20, they developed 300,000 job codes. If we start today, five years from now, we could have a technician go out and inspect a machine, make a determination of what needs to be done, open up a work order with job codes on it. Have the parts be ordered automatically that are on the bill of material and assign the technician who has the skills to when his next available opening is. We can do that all without anybody other than that inspector. The computer systems can't support that today.

Now, the other thing that's interesting is EV is the excuse. EV is not going to be here in 10 years' time. It'll all be hydrogen. And, you know, the president of Ford just recently came out, was talking, answering questions relative to the electric vehicles. And he said, if you've got two or three cars, one of them will be for shopping locally, and that's an application for an electric vehicle. The rest of your vehicles, you're going to need internal combustion engines. So we've got all these things. But going back to that data warehouse you're talking about. MD Anderson, which is one of the major health institutions in America, and others are doing the same thing. They're digitizing patient health records for the last 20 years. Just imagine I go to my doctor. I've had my blood work. I've had x-rays or MRIs or CT scans or whatever the devil it is. He knows my age. He knows my body conditions.

He can tell me exactly what I'm short nutritionally, my weight condition, and what my life expectations should be. You know, I teased my doctor because we talked this way. And he said, you know, you're too heavy. I said, yeah, well, I enjoy my scotch and my wine. Are you telling me to slow down on scotch and wine? He says, well, you'd live longer. And I said, that's cool. How much longer do you think it would be? He said, well, maybe a year. And my response to him, he started laughing. He said, well, it's not worth it. You know, I'll get one more year on life and I have to deprive myself of my scotch and wine for the rest of my life. You know, go away, guys. So business systems. Equipment dealers, and this is not just equipment, it's automotive, it's material handling, it's marine, it's all the capital goods industries. We're going to have to sell differently.

Our customers are already changing the relationship between the manufacturer and the dealer because the dealers aren't big enough to handle the funding that's required to run the business anymore. Somebody was telling me last week that Caterpillar's goal is to have 19 dealers in the United States and Canada. There's two in Canada. That means there'll be 15 in the US. There's something around 30 there today. Who are the 13 that are going away? Comanche is already reduced, except for agriculture. John Deere's reduced. The number of dealers is way down. So everybody comes back and say, well, gee, my sales are up. Well, congratulations. The number of people competing with you has gone down by 50%. Should you not expect your sales to go up? And then what do I give to salesmen? I used to joke about, you know, you hire a guy.

You give them a customer list, you give them the keys to the truck, and you point to the door and say, there's your, you know, you got what you need, go, go sell. That's what we used to do 50 years ago. And guess what? We're not far away from that today. Here's your customers. Here's your customer history. Here's their purchases over the last 20 years. We have that data, but we don't share that with the customer or with the salesman or with the parts department. So, yeah, the OEMs, the dealers. The business systems are going to respond to what the customers need and want and are not asking us for anything. Correct?

There's a big, you know, we talked about the big resignation or the reshuffle or whatever with people changing jobs, right, a couple of years ago. We're going to have unbelievable changes in the distribution channel. There's a lot of dealers today that won't exist 10 years from now. Volvo is going complete electric vehicles. How the hell do you stay in business? It's an interesting question, isn't it?

Yeah, three of our buddies and they're all retired. It might be a good subject. Three men who were responsible for software development for one of the major business suppliers, one for mobile apps, one for interfaces with OEMs, and one for basic system development, all played golf the other day. They're all retired. And I asked the question of one of them. I said, okay, who are your replacements that are at the job today? Now, they're not that far removed from the company, and they couldn't give me the answer. If I'm looking at Microsoft, they probably have a stable of people that do nothing but look at equipment houses, whether it's automotive or material handling, et cetera, to enhance the software to go forward. Look at Amazon. You can buy parts on Amazon, John Deere parts on Amazon. What's going on? The customer will find a hole. They will find a way. And the dealers or OEMs that don't get ahead of that are going to be out of business.

So let's get specific. What would be one area that you'd like dealers to explore? to provoke them into action. Where do you think they're most exposed?

So let me turn that into a buzzword. Let me call that lifecycle management, that I know what the expected life is of every component and every part on every machine and every application, right? Correct. So let me translate that then and put a challenge out to the dealers. And let's do it for the product support crowd because I'm on more solid ground there. I'd like every product support salesman to bring me back. an accurate machine ownership list, including our meter readings and purchase date for every machine, for every customer that they cover, number one. Number two, I would say for every, you can go back to your manufacturer and find out what the standard time is for all of the services, maintenance services,250,500,000,2000, whatever they are. And based on that hour meter reading and application and hours of use, that salesman can tell the customer how much money they're spending on maintenance on each machine.

Step two is over the life of the machine, the expenses that a customer who owns a machine pays are roughly split equally between maintenance costs and repair costs. So whatever that maintenance... cost component is in hours is equal over 20 years to the repair costs in hours. They might have different labor rates. So we can get so each where I'm heading is every salesman can calculate what the potential business is for each of their customers. I'll bet you 100 bucks right now. I won't find 100 salesmen in the country that do that.

It's fair.

Yeah, I think they're asking themselves the same question. Again, if you go backwards, IBM made the statement 40 years ago that they were going to get out of the software business. They were going to stay in the hardware business. And then they had a change in leadership and they reversed course. So they got rid of personal computers and stayed with the huge microprocessors, the Cray computer world. But software is their business. And look what, you know, nobody really paid much attention to Big Blue, did they, when they started beating Kasparov as the best chess player in the world with the computer? You know, people really weren't paying much attention. That's kind of neat. A machine can be smarter than a person. Well, look where we are with artificial intelligence. Machines are far smarter than people today. Only because they're making decisions based on an array of data that you talk about. And that every dealer has.

But there isn't anybody in the dealership that's responsible for technology anymore, developmental technology. They'll maintain the phones. They'll maintain the network. They'll maintain the computer system, the laptops, the PCs that replace them, that repair them. But who's determining what the software direction is of a dealership? Nobody in the dealership.

None that I've been able to find.

We're on the verge of that type of activity for sure. You know, back in 1973, I was sent over to Europe for the first trip to look at warehouses. We were a material handling manufacturer in Quebec, and we were starting to have serious penetration with love trucks. And, you know, Europe had a shortage of land and had a shortage of labor. Canada didn't have a shortage of land or labor. But the owner of the dealership that I worked for said, wait a second, we've got to be prepared for 10 years down the road when this city gets so big that there's no way we have enough land to put up warehouses. And it was amazing. So I went into a warehouse in Stuttgart, Germany for Kodak. It was the main distribution center for Europe for Kodak. And the guy that took me over to the building was a huge building. I'm going to say somewhere in the six to 800 feet square. 60 feet tall. And we go over there. He says, don't be surprised.

So he opened the door and we walked in and the lights went on. There was nobody in the building. Machines were working. Parts were being picked. Parts were being packaged. Parts were being shipped. But there was nobody there. Completely automated. Blew my mind. That is 50 years ago. I went to another place in Chicago. Same type of circumstance. And this blew my mind too. A person coming into the warehouse to pick parts that day was given their orders for the day when they arrived. And the statement was, here's your 500 part numbers or whatever the number was. And when you're finished with that, you can go home. Imagine that. I mean, the world has changed, but we haven't adapted. It's exactly the point that you're making that the business systems aren't keeping up. But I'm not going to blame the business systems as much as I'm going to blame the customer.

You know, Nordstrom morphed from being a shoe company to being a pretty high class, you know, store. And in selling shoes, the old joke was, if you're a good salesman of shoes, you take the old shoes off the guy who's wanting to buy shoes. Women are slightly different, I'm told. But you take the shoes from the guy and you put it a little further out of his reach so he's not going to get up and leave you. And you just go get shoes and bring them to him, and ultimately he buys them. Everybody has a shtick. Everybody has a methodology. The trick that we're not dealing with is all of those methodologies have a life. There's a beginning and an end. They have an expiration date. We're past our expiration date on a whole bunch of things that we live with every day as people in America and Canada. That's not true around the world. We're very blessed here. with the kind of economy and availability of things that we have.

I'm in the Palm Springs area right now. And just driving around looking at the cars, it's a very wealthy community. The people go out to restaurants. They have good quality food. They have good entertainment. They have good grocery stores. That's not true in every city in America or Canada. So how do we change this? You've heard me say I'm like a mule brain in a tin barn. I make a lot of noise, but nobody's listening.

Nobody can. Nobody can.

The business system suppliers have been lulled. into some kind of complacency because of the agony that dealers have experienced in changing business systems. They don't want to do that often. When I came down and was running EBS, when they had 450 dealers at their peak, and when I got there, it was slightly more than 100 because it was a batch business. They had an online business as well. We used to install two to four systems a month, and it's painful for the dealers. And the other thing that dealers tended to do, you know, I think I talked with you about CODA, a financial package out of England that Caterpillar bought a bunch of licenses for all their dealers. And the dealers took the package, and it made the package do exactly what the dealer financial system did previously. That's an indication of the inertia. that we're trying to overcome here. Employees don't like system changes either.

But one of the things I do in consulting is I get people to answer three questions and give me five things on each of those three questions. What would you like to do if you had a magic wand? Give me five things that you would do to make your life easier at work. Second question, give me five things that at work you find to be a pain in the butt to do. Last question, give me five things that if you were able to make changes would be better for your company. And then we take all these people and all those suggestions, we get a flip chart or a whiteboard, whatever is up there, and we make the language the same. And we end up with 10 different things that are on all three lists. It would make your life easier. It would be better for the company. And it's a pain in the butt for you to do. And I ask the question very simply, if they're on all three lists, how come we haven't done something about it yet? Well, then they start looking to the boss.

That's not up to me to do. So that's another thing that we're confronting because there's a generational change going on with Gen Z and alphas and the younger ones and baby boomers and the silent generation. You know, they're starting, the younger ones under 40 are starting to complain about we older ones over 40 because we copy everybody in the world on an email. They say, why the hell are you doing that? You're just wasting my time. If I need to know about it, send it to me. If I don't, don't. There's a whole bunch of things going on out there that are, it's coming. I don't know what's going to provoke it, what's going to be the tipping point, but there will be one. And that's what we're talking about. That's that 100-day thing.

Yeah, it's happening as we speak. Third-party suppliers. You know, Alex Kraft is a good example for me down in Florida as a man who saw a hole, a gap, an opportunity, and he created an Uber for technicians. So if a customer is looking for a repair or a maintenance, he puts something up as a text, and Alex has got a bunch of mechanics who see this text, and they can quote and bid. And away it goes. And it's wildly successful to be expected. The world has changed. It's kind of fun. I don't know where we go. We used to have a thing in Quebec we called PBQ, Profitable Development in Quebec. We had two meetings a year. They were for three days, Friday, Saturday, and half of Sunday. Everybody would come in from the territory. That's the province of Quebec. We'd have about 100 people in the room. We'd have speakers come in who were leading edge people because that's the leader. The owner was very, very much a thinker.

He was an engineer, but he was a peddler at heart, which is an unusual combination. And out of that meeting twice a year, we would have a series of projects that were given, assigned with dates. to be done before the next meeting. So the beginning of every meeting was a review of everything that was assigned and how they did. Next was a state of the economy and the market and the business. And then next was, what do we need to do to get better? I would love to have dealers go back to that kind of circumstance. Oh, now you got the brains back in the family.

With his little dog on his lap. Yeah, way to go. No, but it's kind of interesting. Let's have a review, a formal review with the leadership of the company twice a year. What have we done in the last six months? What's the condition now? What do we need to do now? And who's going to do that for us? And we'll just keep doing that. But nobody's doing that anymore.

And the problem with that, John, I think, is the capacity of people to handle that rate of change is really limited. Change is difficult.

Oh, no, I agree with you 100%. You don't want to get something done. In the old days, it used to be you want to get something done, ask a busy person. Today, I want to say you want to get something done, ask a young person. And by young, I mean somebody under 30. The capacity and educational background of people under 30 that cared about what they were doing is astounding. They make what I, I mean, it was almost like I went to grade school and that was it. Some of these young people are so damn smart, it drives me crazy. I can't keep up anymore.

Oh, you know, who is it in Canada that Canadian tire? They've had leading-edge systems forever. It's replacement parts for cars and all men of people. Once a year, I don't know that they still do it, but they used to have a once-a-year high school students would come in and have to stand behind the counter and perform the sales job. And there was a contest for the high school student that could find all of the parts that customers needed fastest. And there was not one employee. that was able to keep up with those high school kids who didn't work in the company. And that was kind of the carrot in front of the current employees face to get better, to continue to get better. You've got to keep learning. You've got to grow because these young people coming up, holy mackerel. So Oregon, as an example, does not have self-serve, it didn't used to have self-serve gas stations. They thought it was a better idea to keep people employed. Paris, France.

has people sweeping the street every morning at four o 'clock because they don't want people on unemployment. They have one of the highest tax rates in the world. They deliver mail twice a day. You know, there's ways to handle all those things societally through sociology. We're heading for some serious, serious stuff in the next number of years.

So let's change that around. I'm going to call this July 1 instead of June 23rd or whatever it is. And let's say it's going to be October 1. We'll do a follow-up on this one. Okay. And I'll give you a mission. I'll give you a mission. Find me three dealers or three businesses, anybody who's made change in their particular sphere of influence.

Well, if it's nobody, then that creates an opportunity for you and I. We'll host a meeting somewhere in warmth in the winter and invite dealers for a fee to come down and talk, rub shoulders with how we're going to go forward and make change.

Okay. So now we've been pretty critical here, pretty negative here about the world that we're in. I think justifiably. So I'll take some of the blame like you, but you wrote that damn blog. Don't forget that. It wasn't me that wrote that. How do you want to end this? Can you give me an optimistic upside?

Daughter is how old now?

So my grandkids are in the same category,18 and 22, and it's scary. You'd say the same thing about your daughter. What they know, how they think, how they operate is totally different than what I did and what you did. And the same thing's true with my daughter. She's much smarter than I ever was. And I think generationally, we've missed out on taking advantage of the younger people, giving them project work. You know, I was dealing with a group of people this week, about 40 of them, that sell parts on the counter for a large dealer. And they're driven by the sales per employee number. And they've got a reasonable standard, and that standard's been around forever. I'm guilty as an expert in 1980, I provided a standard for the industry. It hasn't been updated, but each of the stores was understaffed.

So what I was probing on and trying to help them grasp was 50% of their customers have no contact with the dealership unless they call the dealership. And by not having anybody touching the customers, that customer is vulnerable to competition. And they all acknowledge this. And I said, I'd like you folks to be able to make outbound phone calls to people that are not assigned to a salesman today. How many can you make? The answer without exception was zero. I'm too busy. I don't have enough people now. I said, okay, wave a wand. I'll give you more time. Tell me how much time you need every day to be able to make two phone calls outbound to customers. They said 20 minutes. I said, okay, if I can get you 20 minutes, I'm going to give you 40 customers. I want you to start making calls on those 40 customers at least once a month. Question, do you think you could get more business out of those customers? Without exception, absolutely.

Why the hell don't we do that? Another dealer, different example, same result, said to me, Ron, you've been pushing me to do this for years. I finally broke down and did it in a store. Every single time I add a parts person, my parts sales goes up. I said, does that surprise you? He said, not anymore. What it was a reflection of is I was fat, dumb, and happy thinking the customer service we were providing was sufficient. It obviously was not. So he's going forward. He hires a person and it keeps on going. Every time he hires one, the sales go up. He's got stair steps that logically apply it. So I asked another guy in the neighboring state who's in the same type of circumstance, do you want to follow his advice, his example? So, no, I'm worried about the economy. Interest rates are going up. Inflation's bad news. I'm going to have to start laying people off. Tale of two.

People, both about the same age, both extremely intelligent, well-educated, experienced. One of them is obviously right, and the other one is obviously wrong. The guy that's right doesn't want to, you know, he'll pass it off. The guy that's wrong will debate forever to say he's right. It's an amazing world we're in.

Yeah.

My wife and I were out to dinner last night at a restaurant. We particularly like it's run by a man from Colombia and his wife from France. It's called the French rotisserie. If you're ever in the Palm Springs area, it's a wonderful restaurant. Louis is his name. He makes his own sangria. Sangria is something that I particularly like because of all the time I spend in Spain. And in Spain, in Barcelona anyways, almost every restaurant that has a sangria has their own recipe. Well, Louis has a recipe, and I all of a sudden like his white sangria because he mixes tequila and rum in it. It's not just wine and fruit. He puts whiskey and vodka in his red sangria. I love them both. So why'd you do that? I said, you drink too much. Is that why you did this? He said, yeah, I drink it to make me. What do your customers think of this? They love it. What made you do it? Well, I didn't like the old fashioned thing. I made a change.

He's got a wonderful restaurant. The menu is fantastic. The food is fantastic. The service is fantastic. So it's quiet here now. It's summertime. It's 110 degrees. Everybody's left. Very few people in the restaurant. Everybody that's in there is a repeat customer. There's a guy in Paris who works at the bar. His name is Colin Firth. He's been the best mixologist in the world three or four times in the last five, eight years. He works at Louis George V or something. And he was asked a question. How do you define your good customers? Is this kind of a? Cheers story that I like to go to a place where everybody knows my name. He said, no, my measure of my customer repeat business is not when they know my name or I know their name, but it's when they know each other's names. That's an interesting change on customer service, isn't it? You're going to come to a place that it's kind of like the old pub in Britain.

200 years ago, everybody went to a public house to have meals and it was like society. We got to get to that place with systems, with businesses. We got to reach out all over the place and ask for help. And you're right. There's a lot of positives. We have more data than ever. We have more computing power than ever. We have more technology and equipment than ever. We have smarter people than ever. We just don't have a lot of leadership taking us to the promised land anymore. Any last shots?

Well, I guess that's – but I'm still trying. I'm not going to go until I get the torch out of my hand. The last thing you're going to see is me on the ground with the torch up in the air. Thank you, John, for – for the discussion. Thank you, everybody, for listening. I hope we provoke some thinking on your part. There's a lot of opportunity, but there's a lot of work to be done. All the best to you. We'll see you at the next Candid Conversation. Mahalo.